Wednesday, March 1, 2017

Korean Bulk and Container Shipping Market Sees More Restructuring and Vessel Charter Swaps

Hanjin Collapse and Overcapacity Means Ripples Still Spreading Through the Trade
Shipping News Feature
SOUTH KOREA – With the worldwide shipping market in the midst of a financial crisis, principally caused by overcapacity, attempts by governments and companies to keep the market sustainable in such troubled times become more widespread, none more so than in South Korea. Having recently overseen the fallout from the bankruptcy of its once largest ocean freight firm, Hanjin Shipping, the Republic will now see the restructuring of its current fourth largest shipping line, SK Shipping, and witnesses promises of support for what is now the country's biggest box carrier.

As of April 1, SK Shipping, a bulk and tanker group, will split its shipping and non-shipping units in an attempt to stay ahead of any further decline the industry could face. The non-shipping operations will fall under the purview of a new entity, tentatively named SK Maritime. The downturn has also caused SK Shipping to cancel the period charters of 20 ships in recent months.

Last month, Hanjin, principally a container carrier, was officially declared bankrupt by South Korean courts, its eventual demise a foreseeable result of a shipping line with mounting debts, coupled with an industry plagued by overcapacity. It therefore comes as no surprise that more and more companies in the ocean freight industry are turning to restructuring or consolidation measures in an attempt to stay viable in the tough times.

Whereas most of the larger container lines are becoming ever more reliant on partnerships which have introduced vessel sharing agreements across almost all the major trade lanes, the tranche of smaller shipping outfits scattered around the globe are likely to find the going ever harder as this situation which SK finds itself in typifies. Some however are bucking the trend, a good example being Honolulu based Matson Inc., a company which has always historically diversified its operations and now says its express transpacific services have benefitted from Hanjin’s demise, a situation which may change on the introduction of new Hyundai Merchant Marine (HMM) services due to start in April.

HMM is now the largest container line in South Korea and this month has found it necessary to issue a joint statement with its main creditor, the state owned Korean Development Bank (KDB), an organisation which was deeply involved with the failed Hanjin. HMM and KDB have been trying to dampen down speculation as to HMM’s future pointing out a rising credit rating, hardly surprising given that the group’s main competitor has hit the rocks.

HMM will begin those Asia - West Coast US services next month following its withdrawal from the G6 Alliance, however as to the much vaunted cooperation with the world’s largest two box lines, MSC and Maersk, in a tie up with their 2M Alliance (the 2M+H Strategic Cooperation), comes not a word, despite the fact services for the new grouping were scheduled for an April launch. Meanwhile HMM is understood to be set to gain from the government fund proposed after the Hanjin collapse which will see HMM vessels purchased by government agencies then re-chartered back to the company.

Even with the host of new alliances the largest box line of all, Maersk, found it necessary last year to separate off its logistics and energy operations, rapidly followed by the sale of the Pentalver operations and a change of leadership. The signs are certainly that unless or until a large slice of the world’s older carriers are scrapped, or there is a large rise in trade, there will be more sleepless nights for the variuos shipping lines creditors.

Photo: Gas transport is a large part of SK’s portfolio.